What does it mean when a house is “under contract”?
It’s easy to be confused about the term “Under Contract” because the terms “Sale Pending”, “Under Contract”, and “In Escrow” are used interchangeably depending on the area of the country the house is in. They all basically mean the same thing, which is that the seller accepted an offer, which made it a contract, and that it’s been turned over to a third party (title company or attorney) to perform the services necessary to coordinate and close the transaction.
Generally speaking, it takes 30-45 days from the date an offer is accepted until the sale “closes” and ownership transfers. During this time there are generally contingencies that have to be removed to consummate the sale, such as inspection, appraisal, and loan contingencies.
Can I make an offer on a sale pending or under contract home?
Generally speaking, YES! Unless there’s a clause preventing it in the contract, seller’s agents (listing agent) often continue to accept back-up offers. This is because the deal can fall through due to inspection problems, appraisal issues, financing problems, title problems, or other reasons.
If you wrote a back-up offer that was accepted, it becomes the next in-line or secondary contract. If the first contract terminates, yours move to primary position and YOU now have it under contract.
Make sure that you work with YOUR OWN REAL ESTATE AGENT in your local city, and not the seller’s agent to discuss making a backup offer. Your agent can be a buyer broker and represent YOU! A good REALTOR® on your side is priceless! And a great place to find one is Mercer Hughes Real Estate Group!
What are the odds that I’ll get to buy a house under contract?
It’s difficult to put a number on it, but it’s definitely worth a shot if this is your dream home and you really want it. To understand the odds, you have to understand the process. Here it is in a nutshell:
- The buyer decides on a home.
- The buyer makes a formal, written offer.
- The seller makes a counteroffer or accepts the offer. This process can go back and forth a bit until accepted or rejected.
- Both buyer and seller come to a meeting of the minds, and sign a contract, which is typically contingent on additional factors like financing and inspection results.
- The buyer’s earnest money is deposited into an escrow account.
- The buyer applies for a mortgage.
- The home is inspected by a home inspector.
- The home is inspected for termites.
- The home is appraised. The lender requires this because the home is the collateral for the loan. It’s smart for the buyer to do anyway to prevent overpaying.
- The loan is underwritten and approved to close.
- The deal is closed at a title or escrow company, or at a real estate attorney’s office. The location depends on state law.
- The deed transfers, seller turns over keys and accepts money for the sale. Done!
This is a very simple overview that is often fraught with problems and hurdles.
When you have the back-up offer you are hoping that the deal breaks because of a problem that can’t be resolved between the buyer and the seller. You may or may not be privy to what happened, but if you move into primary position you have the same opportunity to inspect, appraise, and have title work done that the previous buyer did. Also, if the seller was told about a material defect with the home, but refused to repair it, he may be obligated to disclose it to the next buyer.
You can also terminate the accepted back-up contract without penalty if the contract provides for that. This is useful as you might still be looking for another perfect home to play the odds.
In summary, all hope is not lost just because a house is under contract. An experienced REALTOR® can help you navigate this process and is a very strong ally in your pursuit of a home. Go for it!